Japan Stocks Gain as Yen Falls Before Abe Names Cabinet
Japanese stocks rose, with the Topix Index (TPX) and the Nikkei 225 Stock Average (NKY) at their highest in nine months, as the yen weakened as Shinzo Abe, who has promised to do more to spur inflation, was approved as prime minister.
Panasonic Corp., the maker of Viera televisions, led an advance by electronics companies as the yen fell to its lowest level in 20 months. Nomura Holdings Inc., Japan’s biggest brokerage, advanced for a 10th day amid optimism for the new government. Hitachi Ltd. rose 2.1 percent after its president said the company plans to double its operating margin. Touei Housing Corp. jumped 25 percent after saying it will merge with other developers to counter rising competition.
The Nikkei 225 Stock Average gained 1.5 percent to 10,230.36, its highest since March 27. The Topix rose 1.2 percent to 847.71 at the close of trading in Tokyo, its highest level since April 3. About three stocks advanced for every one that fell on the gauge. The measure has gained about 5.8 percent since Dec. 16 when the Liberal Democratic Party won the general election, boosting optimism that Japan’s leaders will do more to fight deflation and bolster the economy.
“I think the market will keep a strong momentum,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of about 1.79 trillion yen ($21 billion). “The market focus will switch to what measures they will actually introduce and how much impact they can make, after stocks rose on expectations. The market will edge up from the current level if they meet expectations.”
The Topix is headed for a 16 percent increase this year, its biggest yearly gain since 2005, when the index surged 44 percent. The measure traded at 1 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.
The Nikkei 225’s 14-day relative strength index, a measure of price momentum, is at 75.94 today after reaching as high at 84.97 on Dec. 19, the highest since 2005, according to data compiled by Bloomberg. Some traders use a measure above 70 as a sign the market is overbought.
LDP leader Abe was approved as the prime minister today by the lower house, returning him to the office he left in 2007. His party has reached an accord with coalition ally Natsuo Yamaguchi of the New Komeito Party yesterday on a policy package that includes “bold monetary easing” to reach an inflation target of 2 percent.
Nomura gained 2.8 percent to 471 yen, its 10th consecutive day of increases. That’s the longest winning streak since 2003. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, rose 0.7 percent to 449 yen. Credit Saison Co., a consumer credit lender, advanced 6.9 percent to 2,101 yen.
“Market expectations are on the rise for the new government as it beefs up efforts to beat deflation and revive the economy,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc.
Panasonic gained 2.8 percent to 510 yen, while Sony Corp. (6758), which gets about 19 percent of its revenue from the U.S., advanced 4 percent to 943 yen. Mazda Motor Corp., the automaker which counts North America as its biggest market, rose 3.3 percent to 155 yen.
The yen weakened past 85 per dollar for the first time since April 2011 today and is set for a 3.4 percent decline in December, boosting exporter shares. A weaker currency boosts overseas earnings when repatriated.
Among other stocks that rose today, Hitachi gained 2.1 percent to 494 yen. Hitachi President Hiroaki Nakanishi said yesterday that the company will aim to double its operating margin to 10 percent or more eventually. The company is also still in talks with Lithuania for a plan to build a nuclear power plant there, he said.
Condominium builders Touei Housing Corp. jumped 25 percent to 1,292 and Arnest One Corp. surged 24 percent to 1,492 yen after announcing plans to merge with four other developers to counter rising competition and declining demand. The companies will merge under a holding company by November 2013, they said in a joint statement yesterday. Touei and Arnest One were the third and fourth biggest gainers on the Topix.
Volume on the Topix was about 24 percent above the 30-day average, while on the Nikkei 225 it was up 17 percent. Some Asian stock markets including Hong Kong, Australia and New Zealand are closed for holidays today.
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